The Stock Scribe

Caledonia Investments: The Legacy of John Darling

2012-01-15T12:09:00.000+11:00

It was revealed this week that Caledonia Investments intends to short sell stocks for the first time in their history. A definite sign that buy and hold strategies are no longer generating sufficient returns (as I mentioned in my article on algorithmic trading).Caledonia Investments was formed in 1992 as a vehicle to manage the inherited wealth of 20 or so members of the Darling family. These

The Secret World of Algorithmic Trading

2012-01-09T15:03:00.001+11:00

In recent times I have been doing a fair amount of algorithmic trading based on a system that I designed a few years ago (which I rather unimaginatively named “Black Box”). Black Box is just a piece of software that uses statistics to determine long and short entry points for a group of large highly liquid stocks. Each trade will typically result in a profit of between 1.5% to 4% (over an average

The Platinum Asset Management Trusts Muddle Along

2011-11-06T15:09:00.000+11:00

I have for a long time been an admirer of Kerr Neilson, the founder of Platinum Asset Management. But in recent times I have begun to wonder whether Neilson was just fortunate to have obtained some very large returns fairly early on in the history of Platinum that has made the overall record of his funds look much better than what more recent investors have actually experienced.It may be

The Insanity of Australian House Prices

2011-05-29T13:06:00.001+10:00

Traditionally house prices in Australia have equated to approximately five times average weekly ordinary times earnings (AWOTE) as published by the Australian Bureau of Statistics. Currently house prices are anywhere from six to nine times AWOTE (depending on which city you look at).The real estate listings in Australia are littered with houses that cost $1 million+ and we are not really talking

The Royal Wolf Holdings IPO: One to Watch

2011-05-22T12:02:00.001+10:00

Royal Wolf Holdings will list on the ASX on 31 May 2011. The lead manager and underwriter is Credit Suisse and the co managers are Commonwealth Securities and E.L. & C. Baillieu Stockbroking. A number of institutional investors were falling over themselves to get stock in this company and I can see the reasons for their attraction.Royal Wolf makes its money from leasing and selling portable

Berkshire Hathaway is looking rather cheap

2011-05-21T13:03:00.001+10:00

Currently, Berkshire A shares are trading at around $120,000 and the B shares are at approximately $80. Book value per share (BVPS) at the end of the first quarter of 2011 was just over $97,000. Therefore the price-to-book ratio is approximately 1.24.The average (year-end) price-to-book ratio over the period 2005-2010 was 1.44, this compares to 1.76 from 2000-2010 and 1.63 from 1985-2010.Over the

The Volatile Australian Dollar

2011-05-14T15:11:00.000+10:00

Alan Kohler wrote the following on 9th May 2011:Don’t be misled by last week’s commodities crunch, the Australian dollar is heading higher – much higher. That’s partly because of the return of the carry trade.On the same day, John Taylor (CEO and founder of FX Concepts) told the Australian Financial Review:The Australian dollar is really high now – I thought it was going higher but now I’m not so

The Stock Scribe Portfolio surges ahead

2011-02-19T14:20:00.002+11:00

On 5 December 2008, I selected a portfolio of 11 stocks using techniques detailed by Benjamin Graham in his book The Intelligent Investor, (see the original post in my 2008 folder - A Portfolio selected using Graham’s techniques).The initial portfolio value was $1 million with approximately $90,909 invested in 11 companies (see table).As can be seen above, as at 18 February 2011 this portfolio

The S&P 500 gives reason for optimism

2011-02-12T14:55:00.000+11:00

In his recent letter to investors, John Paulson stated that the most relevant indicator that they track in the current environment is the Equity Risk Premium (compiled by JP Morgan). Paulson states that the Equity Risk Premium is the highest it has been in 50 years, which indicates to him that equities will rise further to close the gap with bonds.The JP Morgan data shows that the Equity Risk

Is the Gold bubble about to burst?

2011-02-05T12:27:00.000+11:00

Recent weakness in the price of gold would be sending a few jitters amongst those hedge funds that have built huge positions in the commodity.I must confess that through 2009 and 2010 I actively traded gold. At one point I was fortunate enough to capture a $A163 upward move per ounce in the gold price in only 39 days. I would have captured even bigger profits, however, in recent times, my home

Update Number 2 on my portfolio selected using Graham’s techniques

2009-06-07T12:55:00.000+10:00

1. Instant diversification in a single share (but not in all

Techniques for Investing in Bear Markets

2009-01-31T09:34:00.000+11:00

With markets at multi-year lows in many countries, investors who use fundamental analysis to evaluate shares have become increasingly interested as markets have fallen further and further. We know that Warren Buffett is investing much of his personal portfolio in US stocks and we know that other great investors like Seth Klarman are moving away from cash and into equities. But how do you

Gems of Wisdom from Seth Klarman

2009-01-26T10:21:00.000+11:00

Seth Klarman holds an MBA from Harvard University and was one of the founders of the Boston based Baupost Group. He has developed somewhat of a cult following amongst value investors because of his track record (he has achieved similar returns to those of Warren Buffett’s Berkshire Hathaway). The Baupost Group remained heavily invested in cash during 2007 and into 2008. From all accounts the

Just when you thought it was safe: The financial crisis continues

2009-01-24T14:06:00.000+11:00

The effective collapse of the Royal Bank of Scotland (RBS) has ushered in another phase of the financial crisis. Just when things were starting to look a little better and investors were starting to think about re-entering the markets, good old RBS comes along with a result that must have put the fear of God into British Government officials. The RBS result has reverberated around the

The Stock Market as a Parimutuel System

2009-01-17T11:51:00.000+11:00

I read an article some years ago in which Charlie Munger (the Vice Chairman of Berkshire Hathaway) likened the stock market to a parimutuel betting system (referred to in some countries as a totalizer betting system). This aroused my interest and the more I thought about it, the more I thought that Munger was absolutely correct. A parimutuel or totalizer betting system is where people

Blackmores and Campbell Brothers: Why I like them

2009-01-12T09:39:00.002+11:00

Two companies that I have admired for a long time are Blackmores (BKL) and Campbell Brothers (CPB). Both companies have been listed on the ASX for many years and have excellent track records. Blackmores is a manufacturer of high quality dietary supplements and Campbell Brothers derives most of its profits from the provision of consulting and analytical laboratory services. Let’s look at

Snowball: Things you never knew about Warren Buffett

2009-01-08T11:27:00.000+11:00

There are 11 books sitting on my book shelves that are about Warren Buffett – some of them I bought, others were given to me. Sometimes I have been asked what the best book ever written on Warren Buffett is and I have always said that it’s Roger Lowenstein’s 1995 book: Buffett: The Making of an American Capitalist. However this is no longer true. I was lucky enough to have been given a

Update on my portfolio selected using Graham’s techniques

2009-01-04T11:33:00.001+11:00

On 5 December 2008, I selected a portfolio of 11 stocks using techniques detailed by Benjamin Graham in his book The Intelligent Investor (see the original post here). The initial portfolio value was $1 million with approximately $90,909 invested in 11 companies as follows: Company Buy Price No. of shares 5-Dec-08 Value 2-Jan-09 Value

BHP Billiton – Is it time to buy?

2008-12-30T12:01:00.000+11:00

There are at least half a dozen broking firms that I’m aware of that are currently recommending that their clients buy BHP Billiton. None of these brokers can mention BHP without also mentioning the word “China” in the same sentence. Firstly let’s note this: The revenue that BHP derives from Europe, North America and Japan is (in aggregate) far greater than what it derives from China.

The Art of Stock Valuation

2008-12-26T12:17:00.000+11:00

When you purchase shares in a company, how do you know that the price you are paying is a good price? When you sell, how do you know if the sales price is a good price? To answer these questions you have to be able to estimate intrinsic value. Intrinsic value is the underlying real value of a share in a company. It doesn’t necessarily equate to the current stock price, although the current

Is Mohnish Pabrai the Real Deal?

2008-12-20T17:55:00.000+11:00

He has been billed as the “new Warren Buffett” but is this justified? Mohnish Pabrai first came to my attention in 2007 when he was the successful bidder in an online charity auction the prize for which was lunch with Warren Buffett. Pabrai is a smart guy and he knew that his lunch with Buffett would achieve at least three things. Firstly, he got to spend some time with his hero.

A Portfolio selected using Graham’s techniques

2008-12-13T15:46:00.000+11:00

In his book The Intelligent Investor (first published in 1949 and updated in three further editions the last of which was published in 1973), Benjamin Graham detailed his criteria for selecting common stocks. While I don’t intend reproducing those criteria here, (anyone who is interested can buy or borrow the book), I did use Graham’s filters to screen every company and trust listed on the

Investors lose faith in Macquarie Satellites

2008-12-06T14:53:00.000+11:00

Macquarie Group controls the management of eight ASX listed entities that have performed abysmally in recent times as the following table shows: Name 2007 Price High 2008 Price Low* Percentage Decline Macquarie DDR $1.395 $0.053 -96.2 Macquarie Countrywide $2.300 $0.200 -91.3

Old lessons to be learned from the Panic of 2008

2008-11-29T15:08:00.000+11:00

There is a lot of panic out there at the moment. People who invested large portions of their portfolio in the stock market have taken a real beating. It is times like these that provide an expensive education for those who have forgotten or never knew some of the golden rules of investment: Never keep a significant majority of your investments in the stock market (I don’t care